How Hospitals Face New Competition

As HMOs have increasingly penetrated the health care market in the last few years, teaching hospitals have initiated cost-cutting programs to consolidate administrative services and improve efficiency.

"We have a total quality improvement program that's been ongoing for over four years," Gaintner says.

Gaintner says the hospital began anticipating many of the changes five years ago and decided to focus on what it does best, tertiary and quarternary care, while building partnerships with other institutions to cover primary care.

"We've embarked on a set of very extensive relationships with community hospitals," Gaintner says. The Deaconess Hospital's parent corporation now includes three other hospitals, the New England Baptist Hospital, the Deaconess-Neshoba hospital in Ayre and the Deaconess-Glover hospital in Needham.

"We've also developed fairly strong relationships with three or four community medical centers," Gaintner says. "Our role in the teaching hospitals is to do those things that can't be done in the community, so we're complementary of what they do."

Affiliations seem to be a popular route for hospitals determined to survive the HMO-crowded climate.

Two of Harvard's teaching hospitals--Mass General and Brigham and Women's--have already merged into a corporation called Partners Health-Care System Inc., established formally last spring.

"The goal of Partners HealthCare is an integrated health care system, from primary care to tertiary care," says Michelle Scarlatelli, spokesperson for Brigham and Women's hospital. "We think of the two hospitals as the hub with spokes going out to the other institutions we'll be forming affiliations with."

The merger has begun to yield some competitive improvements, hospital executives say.

Consolidation of the treasury and cash management departments of the two hospitals has already resulted in a savings of $1.5 million, says Vice President Robert Scott. And two new physician groups have just joined the affiliation.

According to Gaintner, the remaining three teaching hospitals--Beth Israel, the New England Deaconess, and Children's--are also considering forming a separate alliance.

Although this association would be looser than Partners', the hospitals could greatly benefit from the affiliation.

For example, the Deaconess can specifically benefit from the excellent pediatric and obstetric services at Beth Israel and Children's, Gaintner says.

"We're talking with a lot of hospitals," says Erin C. Martin, spokesperson for the New England Deaconess Hospital. "I think that all the hospitals are looking at ways to improve the delivery of health care."